Sunday, February 01, 2009

Richard Keen QC, the current Dean of the Faculty of Advocates, has come out in favour of scrapping Scotland’s infamous restrictions on Class Action lawsuits.

The Dean, however, only seems to feel Class Actions should be allowed against Banks & financial institutions … which seems to indicate the cosy relationship between the legal profession and the Banking sector has hit the rocks … no more cheap finance lads ? – Ed

ONE of Scotland's most senior lawyers is calling for ministers to scrap the restriction banning class actions in Scots law, a move that could see a wave of claims against banks.

The suggestion by Richard Keen, QC, the dean of the Faculty of Advocates, would open up the prospect of challenges by groups of shareholders against financial institutions over a lack of information about the state of their business.

It is understood that Scotland's legal profession believes there could be a raft of actions against Royal Bank of Scotland and other financial institutions on the basis that the information given out at the time of rights issues had been inadequate.

Mr Keen said: "The absence of class action certification inhibits pursuit of remedy. It is difficult to fund major litigation of that kind unless you can put together a class action."

Mr Keen's comments follow a string of calls from politicians demanding legal and political action to tackle the crisis – with RBS most in the firing line. Alex Salmond, the First Minister, said yesterday that he believed a parliamentary inquiry should be carried out into the banking crisis in Scotland.

He said any investigation should cover the Financial Services Authority and the role of politicians in overseeing the administration of the financial sector "to ask them why they were asleep on the job".

He said: "I'd rather favour a parliamentary investigation, not just into the Royal Bank of Scotland – that would be daft, as the Royal Bank of Scotland is only one of hundreds of banks worldwide which has got into serious trouble – but into the financial sector."

It emerged at the weekend that Christine Grahame, an SNP MSP, has written to Lothian and Borders Police, demanding that an investigation be carried out into RBS's conduct over its two rights issues last year, while Tavish Scott, MSP, the leader of the Scottish Liberal Democrats, has called for an investigation by the Serious Fraud Office.

Under the leadership of Sir Fred Goodwin, RBS carried out its first £12 billion rights issue in April last year, when thousands of investors forked out £2 a share for a tranche of new stock in the firm. A second rights issue, in November, was shunned by investors and the government had to underwrite the £15 billion issue. RBS's fortunes have nosedived in recent months, with investors watching shares plummet, to close at 12.1p on Friday.

RBS revealed last week it was on course for the biggest loss in UK corporate history, as it expected to write down as much as £20 billion on the falling value of its assets.

Mr Scott said: "I think the banks across the UK must have known what their financial position was much earlier than they were letting on, and that particularly applies to RBS.

"At the time they were asking investors for more money to help their financial position, as RBS giving a full picture of how strong or weak they were as a financial institution? I genuinely don't know, but I believe that the Serious Fraud Office should have a look at it."

He warned that a political inquiry could turn the crisis into a partisan issue and could detract from solving the question of whether investors were misled.

Just last week, the veteran lawyer Ian Hamilton lodged a small-claims action against RBS, saying he had been persuaded to buy 640 shares at the £2 offer price in its 2008 rights issue.